Bridging Protocols Advocate For Open Tech Standards And Condemn LayerZero

Connext teamed up with other cross-chain bridging protocols to condemn LayerZero for deploying a bridge for stETH without support from the token’s issuer, Lido.

The Oct. 27 tweet from Connext criticized LayerZero for deploying a “proprietary representation” of Lido’s stETH token on the Avalanche, BNB Chain, and Scroll networks without support from Lido DAO last week.

“Token-issuing DAOs should be the ultimate arbiters of what version of their asset is canonical on a given chain,” the statement said. “A lack of DAO-led social consensus around the canonical representation of a given asset drives fragmentation.”

The document was co-signed by ChainSafe, Li.Fi, Sygma, Celer, Across, Socket, Hashi, and Router.

LayerZero controversy

On Oct. 26, LayerZero posted a proposal to Lido’s governance forum pitching the launch of a cross-chain bridge for its liquid staking token, stETH, leveraging LayerZero’s Omnichain Fungible Token (OFT) standard.

However, on the same day, LayerZero also announced that the stETH bridge was live and ready for use via its social channels that same day — attracting criticism from prominent voices in the web3 community.

Onlookers slammed LayerZero for front-running Lido’s governance process, despite early discussions yielding significant opposition to the proposal due to security and liquidity fragmentation concerns.

Bridging standards

LayerZero facilitates cross-chain transfers between Ethereum Virtual Machine (EVM)-compatible chains using its OFT standard.

OFT enables cross-chain transactions by minting tokens on a destination chain while simultaneously destroying the tokens on the chain the transfer was sent from. The system also results in the original asset represented by LayerZero’s OFTs becoming locked in the bridge’s smart contracts.

In their joint statement, Connext and company argue that “vendor-locked proprietary standards” should not underpin cross-chain bridging protocols, asserting that the locking mechanism creates systemic risks for asset issuers and tokenholders.

“While marketed as a standard, OFTs and other provider-specific systems are fundamentally owned by the bridges that implement them,” the statement said. “Tokens issued via proprietary standards remain forever tied to the security model of the issuing bridge. Lock-ins discourage active iteration on security… Bridges have suffered over $2B worth of hacks over the past two years as a result of these systemic risks.”

To remedy the situation, the manifesto calls for the adoption of open and public technology standards and the elimination of lock-in mechanisms. The statement offers a modified version of EIP-7281 as one practical solution.